Half-Truths on Gas Taxes

Published: May 27, 1996

Fill 'er up, America, this is the Memorial Day holiday and the start of the "summer driving season." We are a road-running, gas-guzzling people and Bob Dole, Newt Gingrich and Bill Clinton all say our Federal tax should be lowered 4.3 cents a gallon. But the tax relief, if it ever comes, will be trivial -- and will have a negative impact on public policy. It is, in short, something of a political fraud.

Enacted in 1993 to help balance the Federal budget, the tax surcharge did not cause the recent price spike. Suspending or repealing the tax will not bring prices back to the previous, seductive lows that have accelerated driver demand. From January to May the average price of a gallon of regular rose 20 cents, four times the size of the tax at issue, to around $1.28.

Yet even as the House was passing its bill suspending the 4.3 cents until the year's end, Representative Gerald Solomon was celebrating its salubrious effect on his largely rural upstate New York constituents. Mr. Solomon says that many of his neighbors have to drive 100 miles each working day, about 25,000 miles a year. They will not save much -- a dollar a week, if you do the math. Divide 25,000 miles by 21.48, the average fuel efficiency for passenger cars, and you get 1,164 gallons. Multiply that by 4.3 cents and the annual saving is $50.05.

Even those who believe the 1993 tax increase somehow brought on the price leap can look elsewhere for lasting relief. Gasoline prices are already leveling off and will predictably fall, no thanks to politicians like Mr. Dole, who sparked the tax cut bill, or to Mr. Gingrich, who hailed it hyperbolically as the start of a general rollback of "Clinton taxes," or to Mr. Clinton -- who initially ridiculed the idea and then said he would sign their bill suspending the tax past Election Day.

By then, limited new oil supplies from Iraq will probably save more than the tax cut at the gas pump and other market adjustments will shave the cost further. That will not solve the nation's energy problems but rather will compound them. Low prices and higher demand by consumers, many of them all too willing to pay any price to drive at and over higher state speed limits, will only increase American dependency on foreign oil.

If people are worried about energy, not to mention the environment and the budget deficit, suspending the 1993 gasoline tax increase (many politicians would make it permanent next year) is exactly the wrong way to go. The budget cost this year is $2.9 billion, but permanent repeal next year would force Congress to find $34 billion in spending cuts through 2002 to maintain budget balance.

The Senate has yet to take up the gasoline tax. By the time it does, with luck, it may become clear even to the politicians that the bill, never a good idea, will not fool anyone and need not be enacted.